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CPF Advis­ory Pan­el has just released their last 2 recom­mend­a­tions on the CPF enhance­ments.

New CPF Life option with escal­at­ing pay­out

In future, CPF mem­bers will have 3 options to choose for their CPF Life, which is an annu­ity scheme admin­istered by CPF board to give monthly pay­out to retir­ees from age 65 in his life­time. The first two options are CPF Life Stand­ard and CPF Life Basic with level pay­out through­out, with the pri­or giv­ing high­er monthly pay­out and less to the bene­fi­ciar­ies when mem­ber passes on and there is any money left; and lat­ter one giv­ing lower monthly pay­out and more to the bene­fi­ciar­ies when mem­ber passes on and there is any money left.

The new option is one with escal­at­ing pay­out set at 2% increase a year, but the ini­tial monthly pay­out will start at about 20% below in monthly pay­out com­pared to CPF Life Stand­ard plan, assum­ing same premi­um amount and pay­out age.

The new option is good for those who will get level pay­out from their private retire­ment plans, as the monthly pay­out will increase over the years from their CPF Life scheme. It is also good for those who may want to con­tin­ue work­ing bey­ond age 65 and thus have income and do not require high­er pay­out in the ini­tial years but more later when they can­not work at a more advanced age.

Life­time Retire­ment Invest­ment Scheme

Besides the cur­rent CPF Invest­ment Scheme in which CPF mem­bers can invest in the unit trusts offered by the private invest­ment firms and also the Invest­ment-linked plan offered by insurers, CPF mem­bers can now look for­ward to a sim­pler future Life­time Retire­ment Invest­ment Scheme (LRIS) that the gov­ern­ment will work on to offer to CPF mem­bers later.

LRIS will offer a small num­ber of well-diver­si­fied pass­ively man­aged funds, which are sim­pler for CPF mem­bers to choose from, and one which do not need act­ive rebal­an­cing, likely a mar­ket life-cycle invest­ment approach. CPF mem­ber can liquid­ate their LRIS any­time up to the age 70, the latest date that CPF Life pay­out can begin, so that they are not forced to do so at age 65 (CPF Pay­out Eli­gib­il­ity Age) dur­ing the mar­ket down­turn.

This new CPF Invest­ment option may be good for those who want to grow their CPFOA fund more for their retire­ment. I per­son­ally feel that the 4%-5% interest guar­an­teed in our CPF Spe­cial Account is best to be left there for diver­si­fic­a­tion and no risk with high interest.

CPF Advis­ory Pan­el has just announced a series of Focus Group Dis­cus­sions (FGD) to be con­duc­ted from mid-Novem­ber 2014 to mid-Janu­ary 2015. The dis­cus­sion will be on the fol­low­ing top­ics:-

Min­im­um Sum — how to adjust bey­ond 2015 for future retir­ees

Lump sum with­draw­als at age 65 years — how much should CPF mem­bers be able to with­draw and under what con­di­tions

CPF pay­outs — how could CPF pay­outs be adjus­ted to address cost of liv­ing increases over time

Altern­at­ive invest­ments and annu­it­ies — how to provide more flex­ib­il­ity for CPF mem­bers who are pre­pared to take on more risks.

You can email to cpf_panel@mom.gov.sg to con­trib­ute your ideas on the above top­ics or to sign up for the FGD. The first 4 FGDs sched­ule to dis­cuss the first 3 top­ics are as fol­lows:-